Weekly Research Rundown – May 3, 2019

May 3, 2019

Why Are Some Places So Much More Unequal Than Others?

Wage inequality has increased in nearly every metropolitan area in the United States since the 1980s. Large urban areas with strong demand for high-skilled workers tend to be more unequal due to strong but uneven economic growth. Meanwhile, areas with low demand for labor which have been negatively impacted by technological change and globalization show lower levels of inequality as they have experienced lackluster wage growth across workers, mainly among lower skilled jobs.

Debt Relief and Slow Recovery: A Decade after Lehman

Some regions of the U.S. recovered more quickly than others following the Great Recession. This paper uses data on delinquency rates, foreclosure rates, homeownership, mobility, and income along with regional data on employment and house prices to explore the factors that help explain the differences in recovery speeds. Findings indicate the recovery was slower in areas with a higher proportion of fixed-rate mortgages, tighter constraints on refinancing, and less lender capacity to renegotiate loans.

Liquidity funding shocks: the role of banks’ funding mix

This paper evaluates the impact of a wholesale liquidity funding shock on banks’ funding sources, the macroeconomy, and credit availability. Using country-level data from eight Euro area countries, the authors find that banks increasingly rely on ECB funding in place of wholesale funding. Both lending and GDP fall after the shock, though the decline in lending is more persistent. The fall in deposits and growth is more severe and lasts longer in periphery countries.

Institutional Investors, the Dollar, and U.S. Credit Conditions

Financial intermediation has shifted to investors that are relatively more sensitive to changes in the value of the U.S. dollar, such as mutual funds. This has created a new channel through which the dollar affects the U.S. economy. This paper studies the impact of dollar appreciation on the supply of commercial and industrial (C&I) loans by U.S. banks, finding that a one standard deviation increase in the broad dollar index reduces U.S. banks’ C&I loan originations by 10 percent.